Week 07: 17/08/2017 The AWEX EMI closed the week at 1,614c. The 64c rise the EMI was aided by Wednesdays 46c jump (the largest one day rise in over two years) putting the EMI at a new all-time high in AUD values and 25% higher than the same period last year.

The main buying activity was dominated by the large Chinese processors who have (reportedly) been caught with low stocks in front of their processing schedule. This created some forward price interest as the week picked up and was also a substantial period for contracts being settled which were mainly in the buyers favour.

Whilst all MPG’s were affected positively the largest rises were in the 18-5 to 20µ which rose 70-75c and more extraordinary the 21-22µ MPG’s which added 85-92c to last week’s levels. It is interesting to note that the amount of merino fleece wool with less than 1% VM is down on last year offering by 11.4%. This will be placing more pressure on the FNF fleece wool and the FNF skirtings that are used as fleece substitutes.

Skirtings followed the fleece trend, adding 30-40c across the board with extreme competition on the FNF and best specified lots. Crossbreds have performed a Lazarus style recovery over the past few weeks especially in the 28-32 micron categories adding 50-80c with the emphasis on the well classed and skirted lines in the buyer’s cross hairs. Cardings however managed a meagre 11c increase in the northern markets and lost a few pennies in the southern and western regions.

Next week’s offering is back down to 36,888 bales which will keep pressure on the supply, demand imbalance. I would not be surprised to see the market move either way given the delicate balance of the offering verses the additional expense of funding the weekly purchases.

Mike Avery from Southern Aurora Wool reports “The week opened with renewed interest from the bid side with offer sweep across the board ahead of the auction opening. This momentum was maintained into Thursday with growers receiving some historically high hedge levels as the physical auction reached highs rarely seen as we head into spring. Buyers paid up to 1900c for 19.0 microns and 1580c for 21 micron in the early spring. As grower volumes dried up in the nearby months exporters searched for value in the New Year. The New Year trades were highlighted by 1800c for 19.0 in January and 1510c for 21.0 in February.
Trades pushed out into the 2018/19 season with 19.0 executed in August at 1705c and 1660c for March 2019. These represent the 90 and 85 percentile of prices respectively. October options traded at 30 cents for a 1580 strike on 21.0 Microns.”– Marty Moses

Market Report S07/17  (PDF)